Managing Home Equity to Build Wealth By Ray Meadows CPA, CFA, MBA

Size: px
Start display at page:

Download "Managing Home Equity to Build Wealth By Ray Meadows CPA, CFA, MBA"

Transcription

1 Managing Home Equity to Build Wealth By Ray Meadows CPA, CFA, MBA About the Author Ray Meadows is the president of Berkeley Investment Advisors, a real estate brokerage and investment advisory firm. He has worked in real estate and finance for over 15 years at Wells Fargo Bank and Citigroup, among others. Ray is also a professor of finance at Hult International Business School where he teaches Investment Management. If you are like most Americans, you are looking for ways to improve your financial cushion for retirement. While home equity is often a very substantial part of net worth, this does not provide cash for paying the bills. Worse, recent events show that equity can quickly be lost if local real estate markets turn down. This paper will analyze a new option for addressing these problems and compare it to existing strategies for funding retirement. Building up home equity is a traditional way of saving for retirement; but kept in the form of equity it cannot make up for the reduction in employment income that comes with retirement. Homeowners must therefore make some decisions about how to manage their overall asset portfolio to fund retirement needs. In particular, they might need to either reduce cash expenses or turn home equity into spendable cash. Assuming you want to maintain your current level of spending, there are three possible ways to access home equity: 1. Sell the home, invest the equity elsewhere and use the income to pay rent in addition to other spending. 2. Borrow more against the home by refinancing or taking out a home equity loan. 3. Sell a share of the home equity to an investor/partner (using for example a REX Agreement). Selling the home may be the ultimate solution depending upon where and how you want to live. It might be necessary to take this route if you don t plan ahead by managing your liquid assets to ensure they will last the rest of your life. Unless your savings are very large relative to your needs, you will need to minimize withdrawals from retirement accounts for as long as possible to get the most out of tax deferral and return compounding. Drawing on taxable accounts for a few extra years can add a great deal to your long term financial security - so outright sale may be necessary if you don t have enough liquid assets at retirement. Page 1 Copyright 2012

2 Selling an Equity Share Can Extract Cash from your Home Without Selling the House or Taking on Debt. If you are like most Americans, who wish to remain in their homes in retirement, you can increase your financial security by pulling out equity to reinvest elsewhere and use those funds to postpone and/or reduce withdrawals from retirement accounts. Borrowing may be an option if you do so while you still have high enough income to qualify for the loan. Even then, it s most likely the bank will require that a substantial amount of equity remain in the house to protect their loan from losses. When you reinvest this money to provide income, you will need to earn returns higher than the cost of the money you borrowed so as to cover the loan payments and come out ahead over the long run. And, of course, this option increases your leverage and risk from a decline in house prices. If another economic downturn occurs, you could experience losses in both your home equity and your investments, and still be obligated to repay all of the debt secured by your home. The third option is a more recent innovation that allows you to stay in your home but essentially take on a partner who pays you cash for a share of the equity. Obviously you will still want to reinvest this money to maximize your spendable income but the potential benefit is much greater versus borrowing because there are no loan payments to make. Instead the partner collects their share only when you decide to sell the house and that could be up to 30 years in the future. This option will allow a longer deferral of retirement account withdrawals than borrowing and it might turn out to be better than selling to rent because you maintain a locked in cost of housing. In the next section we ll cover some other important points about managing assets for retirement. With these points in mind we ll then dive into the details of a particular equity sharing agreement called a REX Agreement, introduced by a San Francisco-based company called FirstREX. Then we ll compare this with competing solutions, such as borrowing, and discuss the things you should consider when deciding if an equity sharing product makes sense for you. Managing Assets for Retirement: Home Equity Your home is just one part of your portfolio of assets that will support you in retirement, but it is a big part, which makes smart management crucial to the overall success of your investing strategy. Despite the conventional wisdom, recent history shows that house prices, just like all asset prices, sometimes go down. The average house in the U.S. declined 37% from its recent peak. Copyright 2012 Page 2

3 The Lesson of the Housing Bubble: Too Much Wealth Tied up in a Home Risks your Retirement Security. Because homes are bought using leverage, with a small percentage down, such declines wiped out 100% of many homeowners equity far more than the losses experienced in the stock market during the same period. Just as putting too much money into risky technology stocks led many to disaster in the early part of last decade, keeping too much money tied up in home equity can also lead to financial disaster. The lesson we should learn is that we must manage our housing asset along with our total portfolio to minimize risks and maximize retirement security. If you studied Investment Management in school, then you learned about using diversification as a way to reduce risk in a portfolio. In common sense terms, grandma would say: don t put all your eggs in one basket. In a stock portfolio we need to hold at least 20 stocks say 5% in each stock. That way, if one loses 50% of its value, we re still OK; on an overall basis it means a loss of just 2.5% of our portfolio. But most people can hold only one house and they simply have too much wealth tied up in this one asset. To lower risk, we want to reduce the home equity portion of our portfolio to a point where losing it all won t endanger our retirement. Looking at things from an investment management perspective, the smart thing to do is spread out your asset allocation across the various opportunities: home equity, U.S. stocks, U.S. bonds, foreign stocks, foreign bonds, gold, etc. When one thing does poorly, another will do well - so that overall we can achieve better returns and lower risks. Reallocating wealth out of home equity and into other asset classes is a very important strategy regardless of what means you use to pull the cash out of the home. Using a REX Agreement You Can Re-allocate Home Equity into Liquid Assets to Reduce Risk, Increase Income and Fund Retirement Needs. Turning Home Equity into Cash using a Rex Agreement A REX Agreement is a contract which can provide you with a significant lump sum cash payment today in exchange for sharing the future appreciation or depreciation of your home s value with an investor (FirstREX). It is not a loan and thus there are no monthly payments or interest charges. The REX Agreement simply converts a portion of your home equity into cash. The agreement is recorded along with a security instrument but this does not interfere with mortgaging the property up to an agreed limit ranging from 70-75% of property value. The agreement lasts 30 years or until you sell your home. You can terminate early, but you will pay a penalty to terminate in the first five years. Copyright 2012 Page 3

4 You choose the percentage of future appreciation/depreciation to share (between 20% and 50%). You receive an immediate cash payment. In a typical deal, the payment amount might equal about 20% of the house value (I call this the cash ratio) times the chosen share percentage, although this can vary based on the qualifying characteristics of the property and the homeowner. Therefore, if you choose the maximum share of 50%, you might receive cash equal to about 10% of the value of your home up front. When you sell your home, the amount due to FirstREX (if any) is calculated and paid out of the sale proceeds. This is a true equity product, so under the assumptions above, if the house depreciates 20% over the life of the agreement, FirstREX gets nothing at the end and you keep all the cash they paid up front. At inception of the contract, the homeowner and FirstREX must agree on the value of the property. This is typically accomplished using an independent third party appraiser. If the agreement is terminated prior to an actual sale by repurchasing the contract, the ending value would also be determined by an appraisal. If repurchased in the first five years, the property value cannot be less than the initial value. If the homeowner repurchases the contract in years 6 to 10 FirstREX would only share in half the depreciation that it otherwise would for periods longer than 10 years. If the agreement is ended during the first five years, by selling or by repurchasing, there is a termination fee equal to 20% of the cash received at inception of the agreement. There are some limitations on eligibility. You must have good credit and sufficient equity in the home. The home must be typical for the area, well maintained, and not have greater than average risk from natural or environmental hazards. There are occupancy and property type requirements as well. Termination of a REX Agreement The agreement typically terminates when you sell your home, or after 30 years. You also have the flexibility to terminate without selling your home if you believe your home will soon appreciate rapidly or if your life or financial needs change. At termination there is a settlement payment which depends on the change in the house value since inception of the agreement. Assuming that more than 10 years have elapsed, and the home has not declined in value by more than 20%, the payment to FirstREX at termination is calculated as follows: Copyright 2012 Page 4

5 Settlement = Up-Front Payment + Change in House Value FirstREX % share x Note that if the house depreciates, the change in value will be negative and therefore the final settlement payment to FirstREX will be less than the amount received up front. If the house declines by more than the cash ratio (which was assumed to be 20% in the discussion above), then there is no payment to FirstREX at termination. The above applies after 10 years have elapsed. In years 1 to 5, the homeowner would pay the penalty amount as noted previously. In addition, when the homeowner ends the REX Agreement by repurchasing it, instead of selling the home, during years 1 to 5 the Change in House Value cannot be less than zero, and in years 6 to 10, the Change in House Value is multiplied by 50% in the above formula. During the Term of a REX Agreement The agreement requires that the homeowner keep up their mortgage loan and insurance payments and maintain the property in good condition. If you remodel the home, keep records of the work done, and apply for a remodeling adjustment, you can get credit for the increased value attributable to the remodeling work. Other Solutions to Tap Equity for Retirement Needs When interest rates are low, mortgages are generally the lowest cost way to access home equity, but in the current environment there are limitations on who qualifies and the amount it s possible to borrow. In a scenario with low price appreciation, mortgages may not be the cheapest way to go. In either case, as we shall see, an equity sharing arrangement may still make sense. Depending on the Circumstances, A Mortgage May be a Cheaper Source of Funds. But in Many Situations it Can be Optimal to Also Utilize an Equity Sharing Agreement. In the current interest rate environment, if you have the income to qualify, and you are willing to service additional debt, borrowing against your home may make sense. Mortgages with rates fixed for 30 years are priced at about 4% as of April Taking a mortgage loan for up to 75% of the house value (LTV) will not preclude you from also entering into a REX Agreement. Reverse mortgages are available for people over 62 even if they don t have income because these mortgages require no payments. For most situations you would use the Federal Housing Administration s Home Equity Conversion Mortgage Copyright 2012 Page 5

6 (HECM) program. Currently the maximum LTV available is about 66% and upfront fees of over 4% will reduce proceeds further. If your current mortgage is significantly below 66% LTV, this program may be useful if you re not willing to outright sell the property. With a reverse mortgage, the interest accrues and is added to the balance over time so that the LTV will increase through time to the extent that interest charges exceed the appreciation of the property. Note also that the interest rates on reverse mortgages are about 2.3% higher than on regular mortgages (rates are about 6.3% as of April 2012). So it is very likely that on a reverse mortgage the LTV will rise through time. Because there is a maximum loan size under the HECM program, the program is not available to any homeowner that currently owes more than $500,000 on their home, regardless of the value of the home. Determining if the Rex Agreement is Right for You As with all financial decisions we need to consider taxes. The approach we will take is to look at after-tax costs in various scenarios and analyze such costs relative to the benefits of the upfront cash payment. Taxation Effects The REX Agreement is like a forward sale contract (without a stated maturity) and is therefore an unexecuted contract until final settlement. For tax purposes it should be treated as an option on real property. Therefore, the up-front payment received is not taxed and there are no tax implications until contract termination. The homeowner covers all expenses and mortgage payments and gets the corresponding tax deductions. If the contract ends with the sale of the property, the up-front payment should be treated as if it were part of the sales proceeds and the final settlement payment to FirstREX will effectively reduce the sales proceeds received. Therefore, assuming the total gain is within the excludable amount on the principal residence, the homeowner would not have any tax bill upon selling the home. If the contract is terminated without a sale there is no definitive treatment under the current tax code. Any net payment from FirstREX (i.e. after the five year penalty period) would surely be taxable as ordinary income. A payment to FirstREX would probably be treated as closing of the option contract and therefore a capital loss. This should be deductible but only to the Copyright 2012 Page 6

7 extent of $3,000 in excess of offsetting capital gains. 1. In the scenarios that follow we will assume that if you buy back the contract early at a gain, you will pay taxes at combined federal and state tax rates of 32%. Otherwise the gain or loss will not be taxable or deductible. Scenario Cost Analysis Because of the early termination penalty of 20% payable upon termination in the first 5 years, it will usually not make sense to use a REX Agreement for a horizon of less than 5 years. In the longer run, a return to higher appreciation rates on housing could make the REX Agreement more costly. Thus we will focus on an intermediate horizon of 5 years plus one day as our base case horizon for calculating costs and benefits. The table below shows the net after-tax return or cost (as a negative number) on the upfront payment under a variety of scenarios: Appreciation or Annualized Benefit or (Cost) Refer to Depreciation House Sold Buy Back Contract Note: -5% 5.6% 1.8% 1 0% 0% 0% 2 5% (4.6%) (4.6%) 3 10% (8.4%) (8.4%) 4 Notes: 1. If the house depreciates over the time horizon, the homeowner makes money on the REX Agreement a negative cost for the funds. 2. With no appreciation or depreciation, the up-front money is free for the whole five years and can simply be repaid. 3. With 5% cumulative appreciation over 5 years (less than 1% per year), the net annual after-tax cost is 4.6% - roughly equivalent to a high yield bond or reverse mortgage. 4. With 10% cumulative appreciation (less than 2% per year), the net annual after-tax cost rises to 8.4% - not as high as a credit card rate but getting close. It will be tough to beat this rate in your stock portfolio. When Should You Do This If your housing forecast for the next five year is flat or down, you should use the REX Agreement even if you don t need the money 1 The tax treatment discussed here is my opinion only. These transactions are not specifically addressed by the tax laws and thus IRS interpretations may differ from that presented here. Always consult with a Tax Professional before entering the agreement. Copyright 2012 Page 7

8 take it and invest in bonds to increase your income and provide liquidity while reducing your housing risk. Use a REX Agreement to Access Emergency Funds or to Provide Additional Retirement Income Security. If you have a need for cash and you cannot borrow the funds, or you do not want to borrow because of the costs, the REX Agreement could be a sensible choice depending on your overall circumstances. If you are not old enough to draw out of your retirement accounts without penalty, this is a good solution. In some situations the gains from delaying Social Security or delaying retirement account withdrawals are enough to justify using cash from a REX Agreement to bridge the gap. Finally there is the risk of outliving your retirement savings. Many people consider their home equity as their insurance against living too long. They figure they can always sell to fund living expenses beyond 85 or 90 when their regular savings run out. With a REX Agreement it may be possible to cover this risk and still keep the home and at least half the increase in equity. This is because there is a very cost effective way of dealing this risk by buying a deferred annuity also known as longevity insurance. Because these contracts have an insurance feature (you only collect if you live), the returns on the premium paid today can be much higher than bonds or the implicit costs of the REX Agreement. These require a chunk of money up front. If you could otherwise not afford it, then using a REX Agreement to fund purchase of a deferred annuity may be the best choice. Of course, it will depend upon the length of deferral and pricing of the actual contract you purchase. Conclusion For homeowners with equity in their home who don t want or can t qualify for more debt, an equity sharing contract can provide an attractive alternative source of cash to fund life needs while reducing home price risk, without adding debt. Innovative solutions such as the REX Agreement can help homeowners stay in their homes, fund retirement, reduce debt, make needed home improvements or pay for other major purchases such as longevity insurance. There are various situations in which such a product may be right for you. Knowing all the facts, making comparisons to other products, and analyzing your specific circumstances are the keys to making a good financial decision. Copyright 2012 Page 8

PERFECT STORM STATISTICS

PERFECT STORM STATISTICS FPA Symposium ABOUT US At Fairway, customer service is a way of life. Fairway is dedicated to finding the best rates for customers and also offers some of the fastest turn times in the industry. The goal

More information

Real Estate Investment Newsletter November 2003

Real Estate Investment Newsletter November 2003 Maximizing Returns on Equity Why and How In this newsletter I will explain some financial management concepts that provide a framework for maximizing your wealth accumulation over time. Proper application

More information

PERFECT STORM STATISTICS

PERFECT STORM STATISTICS NAIFA CE ABOUT US At Fairway, customer service is a way of life. Fairway is dedicated to finding the best rates for customers and also offers some of the fastest turn times in the industry. The goal is

More information

Background On Reverse Mortgages

Background On Reverse Mortgages Taking A Fresh Look At Reverse Mortgages Webinar Kitces.com Michael E. Kitces MSFS, MTAX, CFP, CLU, ChFC, RHU, REBC, CASL Partner. Director of Research, Pinnacle Advisory Group Publisher. The Kitces Report,

More information

Understanding the taxability of investments

Understanding the taxability of investments Understanding the taxability of investments Managing your portfolio to help control your tax bill Investors need to consider many factors in the process of choosing investments. One at the top of many

More information

A Smart Choice Learn How The New Reverse Mortgage May Fit Into Your Retirement Plan.

A Smart Choice Learn How The New Reverse Mortgage May Fit Into Your Retirement Plan. A Smart Choice Learn How The New Reverse Mortgage May Fit Into Your Retirement Plan. Retire With Confidence For years you ve planned for your retirement. Along the way, you ve made lots of smart decisions,

More information

Understanding A Firm s Financial Statements

Understanding A Firm s Financial Statements CHAPTER OUTLINE Spotlight: J&S Construction Company (http://www.jsconstruction.com) 1 The Lemonade Kids Financial statement (accounting statements) reports of a firm s financial performance and resources,

More information

REVERSE MORTGAGES EXPLAINED

REVERSE MORTGAGES EXPLAINED REVERSE MORTGAGES EXPLAINED Thank you for considering a reverse mortgage loan. As you may know, a reverse mortgage loan is a very special type of loan that permits borrowers to convert some of the equity

More information

Choosing tax-efficient investments

Choosing tax-efficient investments Choosing tax-efficient investments Managing your portfolio to help control your tax bill Investors need to consider many factors in the process of choosing investments. One at the top of many investors

More information

Reverse Mortgage Information Guide

Reverse Mortgage Information Guide Reverse Mortgage Information Guide Table of Contents FHA Reverse Mortgages 3 Common Misconceptions about Reverse Mortgages 4 How the Program Works 4 Benefits of a HECM loan 4 HECM vs. Traditional Mortgage

More information

Advantages and disadvantages of investing in the Stock Market

Advantages and disadvantages of investing in the Stock Market Advantages and disadvantages of investing in the Stock Market There are many benefits to investing in shares and we will explore how this common form of investment can be an effective way to make money.

More information

1. What is the difference between nominal returns and real returns?

1. What is the difference between nominal returns and real returns? End of Chapter 11 Questions and Answers 1. What is the difference between nominal returns and real returns? Answer: Nominal returns include inflation while real returns have inflation netted out. For example,

More information

There are two types of returns that an investor can expect to earn from an investment.

There are two types of returns that an investor can expect to earn from an investment. Benefits of investing in the Stock Market There are many benefits to investing in shares and we will explore how this common form of investment can be an effective way to make money. We will discuss some

More information

Responsible leveraging. A wealth creation strategy

Responsible leveraging. A wealth creation strategy Responsible leveraging A wealth creation strategy What is leveraging? Borrowing to invest is a wealth-building strategy that has been used for thousands of years. The financial term for borrowing to invest

More information

FAQ. (Continued on page 2) An Investment Advisory Firm

FAQ. (Continued on page 2) An Investment Advisory Firm FAQ An Investment Advisory Firm What is QASH Flow Advantage? It is a time-tested model that includes three strategic components: A portfolio of carefully selected Exchange-Traded Funds (ETFs) for diversification

More information

Outstanding mortgage balance

Outstanding mortgage balance Using Home Equity There are numerous benefits to owning your own home. Not only does it provide a place to live, where you can decorate as you want, but it also provides a source of wealth. Over time,

More information

Unit Investment Trusts

Unit Investment Trusts a guide to Unit Investment Trusts A unit investment trust (UIT) is a registered investment company that buys and holds a generally fixed portfolio of stocks, bonds, or other securities. Table of Contents

More information

Guide to buying annuities

Guide to buying annuities Guide to buying annuities Summary of the key points contained in this disclosure document Before you purchase your annuity contract, make sure that you read and understand this guide. While reading this

More information

USA Reverse. Learn the Facts about Reverse Mortgages. Danny Glover - Human Rights Activist

USA Reverse. Learn the Facts about Reverse Mortgages. Danny Glover - Human Rights Activist Learn the Facts about Reverse Mortgages Danny Glover - Human Rights Activist Single-purpose Reverse Mortgages Single-purpose reverse mortgages are the least expensive option. They re offered by some state

More information

Overview. Growing a Real Estate Portfolio. Risks of Real Estate Investing

Overview. Growing a Real Estate Portfolio. Risks of Real Estate Investing Overview Over the past decade, Strongbrook has established a reputation as an industry leader in assisting clients with placing and managing real estate within their investment and retirement portfolios.

More information

Reverse Mortgages A Source of Funds for Retirement?

Reverse Mortgages A Source of Funds for Retirement? Reverse Mortgages A Source of Funds for Retirement? Many people make it a goal of their financial lives to invest in a home. It is a great accomplishment when that last mortgage payment is made. Can a

More information

Mutual Fund Investing Exam Study Guide

Mutual Fund Investing Exam Study Guide Mutual Fund Investing Exam Study Guide This document contains the questions that will be included in the final exam, in the order that they will be asked. When you have studied the course materials, reviewed

More information

TAX, RETIREMENT & ESTATE PLANNING SERVICES. A Guide to Leveraged Life Insurance WHAT YOU NEED TO KNOW BEFORE YOU LEVERAGE YOUR LIFE INSURANCE POLICY

TAX, RETIREMENT & ESTATE PLANNING SERVICES. A Guide to Leveraged Life Insurance WHAT YOU NEED TO KNOW BEFORE YOU LEVERAGE YOUR LIFE INSURANCE POLICY TAX, RETIREMENT & ESTATE PLANNING SERVICES A Guide to Leveraged Life Insurance WHAT YOU NEED TO KNOW BEFORE YOU LEVERAGE YOUR LIFE INSURANCE POLICY This guide provides information on leveraged life insurance.

More information

Click Here to Buy the Tutorial

Click Here to Buy the Tutorial FIN 534 Week 4 Quiz 3 (Str) Click Here to Buy the Tutorial http://www.tutorialoutlet.com/fin-534/fin-534-week-4-quiz-3- str/ For more course tutorials visit www.tutorialoutlet.com Which of the following

More information

What You Should Know About Reverse Mortgages

What You Should Know About Reverse Mortgages What You Should Know About Reverse Mortgages The FHA s Program Reverse mortgages are becoming popular in America. HUD's Federal Housing Administration (FHA) created one of the first. The Home Equity Conversion

More information

The New Tool For Retirement Income Planning. Presented by: Becky Bell, Regional VP, Mortgage Banking

The New Tool For Retirement Income Planning. Presented by: Becky Bell, Regional VP, Mortgage Banking The New Tool For Retirement Income Planning Presented by: Becky Bell, Regional VP, Mortgage Banking Why Consider a Reverse Mortgage? Allows Clients to Take a Dormant Asset (Home Equity) and Put it to Work

More information

Reverse Mortgage. by Jeffrey D. Smith

Reverse Mortgage. by Jeffrey D. Smith There are finance companies that are offering the "Reverse Mortgage" to seniors (at least age 62). Seniors with a substantial amount of equity in their residence are targets of this aggressive predatory

More information

Synthesis of Financial Planning

Synthesis of Financial Planning P 7A R T Synthesis of Financial Planning 1. Tools for Financial Planning Budgeting (Chapter 2) Planned Savings (Chapter 3) Tax Planning (Chapter 4) 2. Managing Your Liquidity Bank Services (Chapter 5)

More information

Understanding Financial Statements. For Your Business

Understanding Financial Statements. For Your Business Understanding Financial Statements For Your Business Disclaimer The information provided is for informational purposes only, does not constitute legal advice or create an attorney-client relationship,

More information

housing information www.housing-information.org Reverse Mortgages A project of Consumer Action

housing information www.housing-information.org Reverse Mortgages A project of Consumer Action housing information www.housing-information.org Reverse Mortgages A project of Consumer Action One of the major benefits of buying a home is the opportunity to build equity, or ownership, in the property.

More information

Commercial Real Estate Investment: Opportunities for Income Generation in Today s Environment

Commercial Real Estate Investment: Opportunities for Income Generation in Today s Environment Commercial Real Estate Investment: Opportunities for Income Generation in Today s Environment Prepared by Keith H. Reep, CCIM Real Estate Investment Consultant In this white paper 1 Advantages of investing

More information

Financial Mappers Tutorial

Financial Mappers Tutorial Financial Mappers Tutorial How to Make a Debt Reduction Plan (Part A) (Age 35 45) How to Invest Without Debt (Part B) (Age 46 65) Disclosure Statement Financial Mappers is not intended to offer, or be

More information

Enhance Your Financial Security

Enhance Your Financial Security Enhance Your Financial Security With a Home Equity Conversion Mortgage Many homeowners across the nation have chosen a Home Equity Conversion Mortgage (HECM) to help them meet financial and personal goals.

More information

CHAPTER 5. Interest Rates. Chapter Synopsis

CHAPTER 5. Interest Rates. Chapter Synopsis CHAPTER 5 Interest Rates Chapter Synopsis 5.1 Interest Rate Quotes and Adjustments Interest rates can compound more than once per year, such as monthly or semiannually. An annual percentage rate (APR)

More information

Buyer s Guide for Deferred Annuities. Table of Contents

Buyer s Guide for Deferred Annuities. Table of Contents Buyer s Guide for Deferred Annuities Table of Contents What Is an Annuity?... 1 When Annuities Start to Make Income Payments... 1 How Deferred Annuities Are Alike... 1 How Deferred Annuities Are Different...

More information

Moss Adams Introduction to ESOPs

Moss Adams Introduction to ESOPs Moss Adams Introduction to ESOPs Looking for an exit strategy Have you considered an ESOP? Since 1984, we have performed over 2,000 Employee Stock Ownership Plan (ESOP) valuations for companies with as

More information

CHAPTER 22: FUTURES MARKETS

CHAPTER 22: FUTURES MARKETS CHAPTER 22: FUTURES MARKETS PROBLEM SETS 1. There is little hedging or speculative demand for cement futures, since cement prices are fairly stable and predictable. The trading activity necessary to support

More information

CHAPTER 2 ACCOUNTING STATEMENTS, TAXES, AND CASH FLOW

CHAPTER 2 ACCOUNTING STATEMENTS, TAXES, AND CASH FLOW CHAPTER 2 ACCOUNTING STATEMENTS, TAXES, AND CASH FLOW Answers to Concepts Review and Critical Thinking Questions 1. True. Every asset can be converted to cash at some price. However, when we are referring

More information

The Effective Use of Reverse Mortgages in Retirement

The Effective Use of Reverse Mortgages in Retirement Page 1 of 8 Copyright 2009, Society of Financial Service Professionals All rights reserved. Journal of Financial Service Professionals July 2009 The Effective Use of Reverse Mortgages in Retirement by

More information

A GUIDE TO MUTUAL FUND INVESTING

A GUIDE TO MUTUAL FUND INVESTING Many investors turn to mutual funds to meet their long-term financial goals. They offer the benefits of diversification and professional management and are seen as an easy and efficient way to invest.

More information

Why is Life Insurance a Popular Funding Vehicle for Nonqualified Retirement Plans?

Why is Life Insurance a Popular Funding Vehicle for Nonqualified Retirement Plans? Why is Life Insurance a Popular Funding Vehicle for Nonqualified Retirement Plans? By Peter N. Katz, JD, CLU ChFC This article is a sophisticated analysis about the funding of nonqualified retirement plans.

More information

Catalyst/Princeton Floating Rate Income Fund Class A: CFRAX Class C: CFRCX Class I: CFRIX SUMMARY PROSPECTUS NOVEMBER 1, 2015

Catalyst/Princeton Floating Rate Income Fund Class A: CFRAX Class C: CFRCX Class I: CFRIX SUMMARY PROSPECTUS NOVEMBER 1, 2015 Catalyst/Princeton Floating Rate Income Fund Class A: CFRAX Class C: CFRCX Class I: CFRIX SUMMARY PROSPECTUS NOVEMBER 1, 2015 Before you invest, you may want to review the Fund s complete prospectus, which

More information

10/22/2014. Securing Retirement with Home Equity Conversion Mortgages. Retirement Planning Using Home Equity. What is a HECM?

10/22/2014. Securing Retirement with Home Equity Conversion Mortgages. Retirement Planning Using Home Equity. What is a HECM? Securing Retirement with Home Equity Conversion Mortgages 2013 Liberty Home Equity Solutions, Inc. All rights reserved For business professional use only. Not intended for distribution to the public..

More information

Investing for Retirement

Investing for Retirement Investing for Retirement Asset Allocation Rollovers Dr. Suzanne Badenhop Professor/Extension Specialist College of Agriculture Understanding investing for retirement Asset Allocation Diversification Rebalance

More information

exploring the options

exploring the options Information caveat The content of this presentation is provided for illustrative purposes only and is not intended to be used for individual investment or financial planning and does not constitute personal

More information

Managing your surplus cash

Managing your surplus cash Managing your surplus cash Savings and investments BusinESS Coach series Establishing a plan Putting your plan to work Thinking long term Business Coach series Your money should work as hard as you do

More information

Buyer s Guide for Deferred Annuities Fixed. Table of Contents

Buyer s Guide for Deferred Annuities Fixed. Table of Contents Buyer s Guide for Deferred Annuities Fixed Table of Contents What Is an Annuity?...2 When Annuities Start to Make Income Payments... 2 How Deferred Annuities Are Alike... 2 How Deferred Annuities Are Different...

More information

FINANCIAL SERVICES BOARD COLLECTIVE INVESTMENT SCHEMES

FINANCIAL SERVICES BOARD COLLECTIVE INVESTMENT SCHEMES FINANCIAL SERVICES BOARD COLLECTIVE INVESTMENT SCHEMES INTRODUCTION This booklet will provide you with information on the importance of understanding ways in which Collective Investment Schemes ( CIS )

More information

Converting Home Equity into Income: A Reverse Mortgage Review

Converting Home Equity into Income: A Reverse Mortgage Review Converting Home Equity into Income: A Reverse Mortgage Review Are you interested in the possibility of converting equity in your home into cash without having to move or assume debt that has to be currently

More information

Guide to Reverse Mortgages

Guide to Reverse Mortgages Guide to Reverse Mortgages Prepared by Steve Juetten, CFP Juetten Personal Financial Planning, LLC. www.finpath.com 425-373-9393 Disclaimer: the information in this report was prepared from reliable sources;

More information

FREE MARKET U.S. EQUITY FUND FREE MARKET INTERNATIONAL EQUITY FUND FREE MARKET FIXED INCOME FUND of THE RBB FUND, INC. PROSPECTUS.

FREE MARKET U.S. EQUITY FUND FREE MARKET INTERNATIONAL EQUITY FUND FREE MARKET FIXED INCOME FUND of THE RBB FUND, INC. PROSPECTUS. FREE MARKET U.S. EQUITY FUND FREE MARKET INTERNATIONAL EQUITY FUND FREE MARKET FIXED INCOME FUND of THE RBB FUND, INC. PROSPECTUS December 31, 2014 Investment Adviser: MATSON MONEY, INC. 5955 Deerfield

More information

Loan Disclosure Statement

Loan Disclosure Statement ab Loan Disclosure Statement Risk Factors You Should Consider Before Using Margin or Other Loans Secured by Your Securities Accounts This brochure is only a summary of certain risk factors you should consider

More information

Paragon 5. Financial Calculators User Guide

Paragon 5. Financial Calculators User Guide Paragon 5 Financial Calculators User Guide Table of Contents Financial Calculators... 3 Use of Calculators... 3 Mortgage Calculators... 4 15 Yr vs. 30 Year... 4 Adjustable Rate Amortizer... 4 Affordability...

More information

Assist. Financial Calculators. Technology Solutions. About Our Financial Calculators. Benefits of Financial Calculators. Getting Answers.

Assist. Financial Calculators. Technology Solutions. About Our Financial Calculators. Benefits of Financial Calculators. Getting Answers. Assist. Financial s Technology Solutions. About Our Financial s. Helping members with their financial planning should be a key function of every credit union s website. At Technology Solutions, we provide

More information

Insured Annuities: Beyond the Basics

Insured Annuities: Beyond the Basics Insured Annuities: Beyond the Basics Achieving a great after-tax return on fixed-income assets John M. Nicola, CLU, CHFC, CFP Table of Contents Introduction.................................. 3 Insured

More information

A GUIDE TO HOME EQUITY LINES OF CREDIT. Call or visit one of our offices today to see what products in this guide we have to offer you!

A GUIDE TO HOME EQUITY LINES OF CREDIT. Call or visit one of our offices today to see what products in this guide we have to offer you! A GUIDE TO HOME EQUITY LINES OF CREDIT Call or visit one of our offices today to see what products in this guide we have to offer you! TABLE OF CONTENTS Introduction What is a home equity line of credit

More information

advisory & Brokerage consulting services Make Your Retirement Savings Last a Lifetime

advisory & Brokerage consulting services Make Your Retirement Savings Last a Lifetime advisory & Brokerage consulting services Make Your Retirement Savings Last a Lifetime Member FINRA/SIPC ADVISORY & Brokerage consulting SERVICES Three Things to Consider When Planning for Retirement Today,

More information

Variable Annuities. Reno J. Frazzitta Investment Advisor Representative 877-909-7233 www.thesmartmoneyguy.com

Variable Annuities. Reno J. Frazzitta Investment Advisor Representative 877-909-7233 www.thesmartmoneyguy.com Reno J. Frazzitta Investment Advisor Representative 877-909-7233 www.thesmartmoneyguy.com Variable Annuities Page 1 of 8, see disclaimer on final page Variable Annuities What is a variable annuity? Investor

More information

SHOPPING FOR A MORTGAGE

SHOPPING FOR A MORTGAGE SHOPPING FOR A MORTGAGE The Traditional Fixed-Rate Mortgage Key characteristics: Level payments, fixed interest rate, fixed term. This mortgage is the one which most of us know, and it is still the loan

More information

Variable Annuities 101

Variable Annuities 101 WealthMark Advisory Services Philip Scholler President/CEO 5001 Horizons Drive Suite 201 Columbus, OH 43220 614-824-4352 phil@wealthmarkas.com www.wealthmarkas.com Inside Workbook: What Is a Variable Annuity?

More information

What You Need to Know About Roth IRA Conversions in 2010

What You Need to Know About Roth IRA Conversions in 2010 What You Need to Know About Roth IRA Conversions in 2010 Your Guide to THE 2010 IRA Tax Law Changes From the editors at SmartMoney Custom Solutions Dear Reader, The year 2010 offers you an unprecedented

More information

Investing in unlisted property schemes?

Investing in unlisted property schemes? Investing in unlisted property schemes? Independent guide for investors about unlisted property schemes This guide is for you, whether you re an experienced investor or just starting out. Key tips from

More information

Part VII Individual Retirement Accounts

Part VII Individual Retirement Accounts Part VII are a retirement planning tool that virtually everyone should consider. The new IRA options also have made selecting an IRA a bit more complicated. IRA Basics The Traditional IRA is an Individual

More information

Accounts payable Money which you owe to an individual or business for goods or services that have been received but not yet paid for.

Accounts payable Money which you owe to an individual or business for goods or services that have been received but not yet paid for. A Account A record of a business transaction. A contract arrangement, written or unwritten, to purchase and take delivery with payment to be made later as arranged. Accounts payable Money which you owe

More information

TOWN OF NATICK OBRA 457 DEFERRED COMPENSATION GOVERNMENTAL PLAN DISTRIBUTION FORM

TOWN OF NATICK OBRA 457 DEFERRED COMPENSATION GOVERNMENTAL PLAN DISTRIBUTION FORM TOWN OF NATICK OBRA 457 DEFERRED COMPENSATION GOVERNMENTAL PLAN DISTRIBUTION FORM PARTICIPANT/ ALTERNATE PAYEE INFORMATION DISTRIBUTION REASON PAYMENT METHOD SPOUSE S CONSENT TO DISTRIBUTION (not applicable

More information

NAIC Buyer s Guide for Deferred Annuities

NAIC Buyer s Guide for Deferred Annuities NAIC Buyer s Guide for Deferred Annuities Prepared by the National Association of Insurance Commissioners The National Association of Insurance Commissioners is an association of state insurance regulatory

More information

Options for Obtaining Cash from Your Home s Equity Last update: May 16, 2014

Options for Obtaining Cash from Your Home s Equity Last update: May 16, 2014 Summary Options for Obtaining Cash from Your Home s Equity Last update: May 16, 2014 For most people, it is better not to tap your home equity unless you need to, but there are circumstances when it may

More information

EXPLORING YOUR IRA OPTIONS. Whichever you choose traditional or Roth investing in an IRA is a good step toward saving for retirement.

EXPLORING YOUR IRA OPTIONS. Whichever you choose traditional or Roth investing in an IRA is a good step toward saving for retirement. EXPLORING YOUR IRA OPTIONS Whichever you choose traditional or Roth investing in an IRA is a good step toward saving for retirement. 2 EXPLORING YOUR IRA OPTIONS Planning for retirement can be a challenging

More information

Seniors Reverse Mortgage Fact File and Answers to Frequently Asked Questions

Seniors Reverse Mortgage Fact File and Answers to Frequently Asked Questions Seniors Reverse Mortgage Fact File and Answers to Frequently Asked Questions A public information service from Access Reverse Mortgage 1-888-340-0305 2014 Access Reverse Mortgage Corp.. All rights reserved.

More information

CHAPTER 5 INTRODUCTION TO VALUATION: THE TIME VALUE OF MONEY

CHAPTER 5 INTRODUCTION TO VALUATION: THE TIME VALUE OF MONEY CHAPTER 5 INTRODUCTION TO VALUATION: THE TIME VALUE OF MONEY Answers to Concepts Review and Critical Thinking Questions 1. The four parts are the present value (PV), the future value (FV), the discount

More information

Making Retirement Assets Last a Lifetime PART 1

Making Retirement Assets Last a Lifetime PART 1 Making Retirement Assets Last a Lifetime PART 1 The importance of a solid exit strategy During the working years, accumulating assets for retirement is one of the primary goals of the investing population.

More information

Reverse Mortgage Counseling Checklist

Reverse Mortgage Counseling Checklist Reverse Mortgage Counseling Checklist Have these items available for your counseling session... - Loan Comparison Page The calculator loan results is an estimate of available reverse mortgage programs

More information

Nationwide Mortgage Licensing System #222955

Nationwide Mortgage Licensing System #222955 Nationwide Mortgage Licensing System #222955 Senior Concerns Is your mortgage paid off? Is your Social Security and/or pension sufficient? Rising costs of living: gas, health care, food, utilities, medications,

More information

Bond Mutual Funds. a guide to. A bond mutual fund is an investment company. that pools money from shareholders and invests

Bond Mutual Funds. a guide to. A bond mutual fund is an investment company. that pools money from shareholders and invests a guide to Bond Mutual Funds A bond mutual fund is an investment company that pools money from shareholders and invests primarily in a diversified portfolio of bonds. Table of Contents What Is a Bond?...

More information

Premium Financing: Common Financing Traps and Dilemmas

Premium Financing: Common Financing Traps and Dilemmas Premium Financing: Common Financing Traps and Dilemmas Premium financing is often used as a way for a client to leverage his or her current liquid assets. Instead of writing the check for the premium due,

More information

Using debt effectively Smart strategies for 2015 2016

Using debt effectively Smart strategies for 2015 2016 Using debt effectively Smart strategies for 2015 2016 William Shakespeare wrote, Neither a borrower nor a lender be, but the fact is debt can be a very useful tool when used properly. Contents The value

More information

UNDERSTANDING WHERE YOU STAND. A Simple Guide to Your Company s Financial Statements

UNDERSTANDING WHERE YOU STAND. A Simple Guide to Your Company s Financial Statements UNDERSTANDING WHERE YOU STAND A Simple Guide to Your Company s Financial Statements Contents INTRODUCTION One statement cannot diagnose your company s financial health. Put several statements together

More information

Buyer s Guide for. Deferred Annuities

Buyer s Guide for. Deferred Annuities Buyer s Guide for Deferred Annuities Prepared by the NAIC National Association of Insurance Commissioners The National Association of Insurance Commissioners is an association of state insurance regulatory

More information

SPDR Wells Fargo Preferred Stock ETF

SPDR Wells Fargo Preferred Stock ETF SPDR Wells Fargo Preferred Stock ETF Summary Prospectus-October 31, 2015 PSK (NYSE Ticker) Before you invest in the SPDR Wells Fargo Preferred Stock ETF (the Fund ), you may want to review the Fund's prospectus

More information

Smart strategies for using debt 2012/13

Smart strategies for using debt 2012/13 Smart strategies for using debt 2012/13 Appreciating the value of debt William Shakespeare wrote, Neither a borrower nor a lender be, but the fact is debt can be a very useful tool when used properly.

More information

Variable annuities. A tax-advantaged way to save for retirement

Variable annuities. A tax-advantaged way to save for retirement Variable annuities A tax-advantaged way to save for retirement Common terms Annuitant The person (may be the same as the contract owner) whose life expectancy is used to calculate the income payment amount

More information

Real Estate Investment Newsletter July 2004

Real Estate Investment Newsletter July 2004 The Case for Selling Real Estate in California This month I am writing the newsletter for those investors who currently own rental properties 1 in California. In any type of investing, be it real estate,

More information

ALLOCATION STRATEGIES A, C, & I SHARES PROSPECTUS August 1, 2015

ALLOCATION STRATEGIES A, C, & I SHARES PROSPECTUS August 1, 2015 ALLOCATION STRATEGIES A, C, & I SHARES PROSPECTUS August 1, 2015 Investment Adviser: RidgeWorth Investments A Shares C Shares I Shares Aggressive Growth Allocation Strategy SLAAX CLVLX CVMGX Conservative

More information

INVESTING IN MORTGAGE FUNDS?

INVESTING IN MORTGAGE FUNDS? INVESTING IN MORTGAGE FUNDS? Independent guide for investors about unlisted mortgage funds Mortgage funds can also be called mortgage trusts or mortgage schemes. About ASIC The Australian Securities and

More information

CHAPTER 10 ANNUITIES

CHAPTER 10 ANNUITIES CHAPTER 10 ANNUITIES are contracts sold by life insurance companies that pay monthly, quarterly, semiannual, or annual income benefits for the life of a person (the annuitant), for the lives of two or

More information

WAYS TO WEALTH - IN YOUR 20's TIME TO GET SMART WITH YOUR MONEY

WAYS TO WEALTH - IN YOUR 20's TIME TO GET SMART WITH YOUR MONEY WAYS TO WEALTH - IN YOUR 20's TIME TO GET SMART WITH YOUR MONEY Whether you're studying, working or travelling, living at home or with friends, saving to buy your own place or you have a mortgage, now

More information

Understanding RSPs. Your Guide to Retirement Savings Plans

Understanding RSPs. Your Guide to Retirement Savings Plans Understanding RSPs Your Guide to Retirement Savings Plans Getting Started Some retirement basics Getting Ahead Setting your retirement savings goals Getting the Most Maximizing your RSP growth Getting

More information

retirement income solutions *Advisor Design guide for Life s brighter under the sun What s inside Retirement income solutions advisor guide USE ONLY

retirement income solutions *Advisor Design guide for Life s brighter under the sun What s inside Retirement income solutions advisor guide USE ONLY Retirement income solutions advisor guide *Advisor USE ONLY Design guide for retirement income solutions What s inside Discussing retirement needs with clients Retirement income product comparison Creating

More information

Nuveen Intelligent Risk Conservative Allocation Fund will be liquidated after the close of business on June 24, 2016.

Nuveen Intelligent Risk Conservative Allocation Fund will be liquidated after the close of business on June 24, 2016. NUVEEN INTELLIGENT RISK CONSERVATIVE ALLOCATION FUND SUPPLEMENT DATED APRIL 18, 2016 TO THE SUMMARY PROSPECTUS DATED DECEMBER 31, 2015 Nuveen Intelligent Risk Conservative Allocation Fund will be liquidated

More information

Introduction to Reverse Mortgages...

Introduction to Reverse Mortgages... Introduction to Reverse Mortgages... A reverse mortgage is a loan that allows you to access a portion of the available equity in your home. The proceeds from the loan may be *tax-free and you choose how

More information

Converting Home Equity into Income: AReverseMortgageReview

Converting Home Equity into Income: AReverseMortgageReview Converting Home Equity into Income: AReverseMortgageReview Are you interested in the possibility of converting equity in your home into cash without having to move or assume debt that has to be currently

More information

A variable annuity is a type of annuity in which the contract owner directs the overall investment strategy for the funds placed in the contract.

A variable annuity is a type of annuity in which the contract owner directs the overall investment strategy for the funds placed in the contract. The term annuity derives from a Latin term meaning annual and generally refers to any circumstance where principal and interest are liquidated through a series of regular payments made over a period of

More information

A variable annuity is a type of annuity in which the contract owner directs the overall investment strategy for the funds placed in the contract.

A variable annuity is a type of annuity in which the contract owner directs the overall investment strategy for the funds placed in the contract. The term annuity derives from a Latin term meaning annual and generally refers to any circumstance where principal and interest are liquidated through a series of regular payments made over a period of

More information

A guide to margin borrowing

A guide to margin borrowing A guide to margin borrowing Before you borrow on margin, it is important to review your financial situation, investment objectives, risk tolerance, time horizon, diversification needs, and liquidity objectives

More information

Reverse Mortgages. Federal Trade Commission ftc.gov

Reverse Mortgages. Federal Trade Commission ftc.gov Reverse Mortgages Federal Trade Commission ftc.gov If you re 62 or older and looking for money to finance a home improvement, pay off your current mortgage, supplement your retirement income, or pay for

More information

Section D. Reverse Mortgage Loan Features and Costs Overview

Section D. Reverse Mortgage Loan Features and Costs Overview Section D. Reverse Mortgage Loan Features and Costs Overview Contents This section contains the following topics: Topic See Page 1. Types of Reverse Mortgage Products 5-D-2 2. Reverse Mortgage Loan Limits

More information

A GUIDE TO. reverse mortgages. Live the retirement you dreamed

A GUIDE TO. reverse mortgages. Live the retirement you dreamed A GUIDE TO reverse mortgages Live the retirement you dreamed Guide Content 14What Is A Reverse Mortgage? 24How Do I Qualify? 34 What Can A Reverse Mortgage Be Used For? 44How Much Money Could I Qualify

More information

A Technical Guide for Individuals. The Whole Story. Understanding the features and benefits of whole life insurance. Insurance Strategies

A Technical Guide for Individuals. The Whole Story. Understanding the features and benefits of whole life insurance. Insurance Strategies A Technical Guide for Individuals The Whole Story Understanding the features and benefits of whole life insurance Insurance Strategies Contents 1 Insurance for Your Lifetime 3 How Does Whole Life Insurance

More information

The Investment Implications of Tax-Deferred vs. Taxable Accounts

The Investment Implications of Tax-Deferred vs. Taxable Accounts FEATURE While asset allocation is the most important decision an investor can make, allocating a given mix among accounts with different tax structures can be a taxing question. The Investment Implications

More information

SUMMARY PROSPECTUS. TCW High Yield Bond Fund FEBRUARY 29 I SHARE: TGHYX N SHARE: TGHNX

SUMMARY PROSPECTUS. TCW High Yield Bond Fund FEBRUARY 29 I SHARE: TGHYX N SHARE: TGHNX TCW High Yield Bond Fund I SHARE: TGHYX N SHARE: TGHNX 20 6 FEBRUARY 29 SUMMARY PROSPECTUS Before you invest, you may want to review the Fund s Prospectus which contain more information about the Fund

More information